Online resource center to help you explore these key issues, and others, regarding your estate.

Practice Areas

Mr. Miller has many years of experience in designing and implementing a comprehensive variety of Trusts, Wills, and other estate planning documents, as well as settling estates in the most expedient and appropriate method. Further, he counsels and assists clients on becoming eligible for VA benefits and Medi-Cal.

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VA Pension/Aid & Attendance/Medi-Cal

Mr. Miller has been active in the area of VA Pension and Medi-Cal for well over a decade. He uses various specialized types of Trusts as well as non-trust strategies to gain eligibility for his clients and save the family money.

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Probate & Estate Administration

Mr. Miller has been settling estates (both simple and complex) for well over 40 years. The starting point is always to create a strategy to settle the estate in the most efficient manner possible with a minimum of taxes. Often times the strategy created allows the family to bypass Probate Court proceedings.

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Medi-Cal and the Missing Beneficiary: Protecting Your IRA from Recovery…

By merv,

  Filed under: Elder Law, Medi-Cal Benefits, Probate & Estate Administration

Dear Mr. Miller:

I am 85 years old and live in an assisted living facility.  I understand that Medi-Cal no longer has any net worth requirements, but I am worried that after I die they can still get reimbursed from my assets.  Is that true?

Beloved Curmudgeon

Medi-Cal’s Helping Hand, But With Strings Attached
IRAs: A Target for Recovery
The No-Beneficiary Conundrum
Escaping the Repayment Maze
The Importance of Planning
Beyond Medi-Cal: The Bigger Picture

Dear Curmudgeon:

You are right about the net worth requirements being abolished.  Now we focus on income requirements and avoiding pay back to Medi-Cal.  Here’s one of the really big problems for those who have IRAs or similar tax advantaged plans.

Imagine this: you rely on Medi-Cal, California’s Medicaid program, to cover your medical expenses. After a long life, you pass away, leaving behind a nest egg in an IRA – but you never named a beneficiary. What happens to that money? Unfortunately, the answer might involve Medi-Cal coming knocking on your estate’s door.

Medi-Cal’s Helping Hand, But With Strings Attached:  Medi-Cal is a lifesaver for many Californians, providing essential healthcare coverage to low-income residents. However, many of its programs operate with a “payback” provision called estate recovery. This means the state can seek reimbursement for your Medi-Cal benefits from your estate after you die.

IRAs: A Target for Recovery:  IRAs, or Individual Retirement Accounts, are popular retirement savings vehicles. They offer tax advantages but come with some inheritance wrinkles. If your IRA lacks a designated beneficiary, it becomes part of your estate. This makes it a prime target for Medi-Cal recovery.

Consider John, a widower who receives Medi-Cal benefits. He has a sizable IRA but hasn’t gotten around to naming a beneficiary. John passes away unexpectedly. Because the IRA defaults to his estate, Medi-Cal can potentially claim reimbursement from those funds for the program’s expenses on John’s behalf. However, if John had named his adult daughter as the IRA beneficiary, the money would have transferred directly to her, bypassing his estate and falling outside Medi-Cal’s reach.

The No-Beneficiary Conundrum:  So, why wouldn’t someone name a beneficiary on their IRA? Reasons vary. Maybe you haven’t decided who to leave it to, or perhaps you had a falling out with a previous beneficiary. Or maybe the beneficiary died!  Whatever the reason, the lack of a designated recipient opens the door for Medi-Cal recovery.

Escaping the Repayment Maze:  There are ways to potentially shield your IRA from Medi-Cal’s reach:

  • Name a Beneficiary (Today!)This is the simplest solution. Choose a trusted loved one or consider a charity. Naming a beneficiary removes the IRA from your estate, effectively taking it out of Medi-Cal’s recovery equation.
  • Living Trust Magic:   Setting up a revocable living trust can be a strategic move. By naming the Trust as the beneficiary of the IRA, you can potentially avoid probate, a legal process that exposes your assets – including the IRA – to Medi-Cal’s scrutiny. However, consult an attorney to ensure the trust is properly structured to achieve your goals.
  • Spousal Protections: If you’re married, your spouse may be entitled to all or a portion of your IRA. This spousal inheritance may fall outside Medi-Cal’s recovery purview.
  • Planning for the Future: If you plan to receive long-term care in a nursing home and anticipate needing Medi-Cal assistance, explore strategies like gifting assets to qualified recipients well before needing care. This can help reduce your estate’s value and potentially minimize Medi-Cal’s recovery claim. However, be aware of “look-back” periods, where Medi-Cal examines asset transfers made within a certain time frame. Consulting with an elder law attorney is crucial for navigating these complexities.

The Importance of Planning:  Remember, even with these strategies, Medi-Cal recovery laws are intricate and subject to change. Consulting with an attorney specializing in elder law and estate planning is vital to understand your options and create a personalized plan that considers your specific circumstances.

Beyond Medi-Cal: The Bigger Picture:  Even if Medi-Cal isn’t a concern, naming a beneficiary on your IRA ensures your wishes are carried out after you’re gone. It streamlines the inheritance process for your loved ones, avoiding potential disputes and delays.  But again, consult an attorney so that you look at your entire holdings and not just the IRA.

Taking control of your IRA’s future ownership provides peace of mind. By understanding Medi-Cal recovery and exploring your options, you can protect your hard-earned savings and ensure your legacy goes where you intend it to.

Let’s go over your IRAs and other assets and make sure you have this Medi-Cal loophole shut tight!  Give us a call at 760-436-8832 to schedule an appointment.

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About Living Trusts

About Living Trusts is hosted by the Law Offices of Merwyn J. Miller, as your online resource center to help you explore these key issues, and others, regarding your estate.

Merwyn J. Miller, J.D.

  • Board Certified Specialist in Estate Planning, Trust & Probate Law
  • Co-Author of legal text book and of “Don’t Go Broke in a Nursing Home
  • Teacher of law courses at public and private colleges
  • Continuing Education Instructor for attorneys
  • Columnist for largest regional newspaper in San Diego County and professional journals for 15 years, Contributing author to the book “In Your Service: The Veteran’s Friend”
  • Masters Degree in Financial Services - Estate Planning

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